Most commercial property owners pay substantial premiums in exchange for commercial property insurance, often in the form of an "all-risk" insurance policy. "All-risk" policies cover all losses covered unless otherwise expressly excluded by the insurer in the insurance.
But what about when a business owner buys a commercial property and wants to start building and / or renovating the property before opening the property to companies?
Usually the owner of the said company will buy a so-called "Builder & # 39 ;s Risk" insurance. Another name for this type of insurance is known as "building" insurance, which is its own specialized type of real estate insurance that helps protect buildings under construction. This type of insurance is necessary for those undergoing construction projects, but can often feel quite complex. 1
So, the "Builder & # 39 ;s Risk" policy covers construction projects – what does that mean in terms of what property is covered? Well, the insurance policy is meant to cover buildings and structures that are under construction, but they usually also provide coverage and protect (1) materials, (2) supplies and (3) construction equipment.
Notice how I use words like "should" and "should"? It is not by mistake; that's what these policies are designed to do. The wording of these types of construction policies often makes it possible for insurers to look a little better in the way that they deny meritorious claims made under policy language. Look at typical wordings under a construction policy:
We will pay for direct physical loss of or damage to
Covered property in the premises described in
Statements caused by or caused by any covered cause of loss.
1. Covered Property
Covered Property, used in this coverage
Part, refers to the type of property described in
this section, A.1., And limited in A.2. Property
Not included, if an insurance limit is shown
in the declarations for that type of property.
Building under construction, which means
building or structure described in the declarations while construction process
f. The following property:
(1) Furnishings and machinery;
(2) Equipment used to operate the building; and
(3) Your building materials and supplies
used for construction.
provided that such property is intended to be
permanently located in or on the building
or the structure described in the declarations
or within 100 feet of its premises;
c. If not covered by other insurance, temporary structures built or assembled on site, including cribbing, scaffolding and constructions.
Seems pretty simple, right? A building under construction is defined as a building or structure specified in the explanatory page, while it is under construction . Interestingly, the (extremely significant) phrase "under construction" is not defined anywhere in the insurance, which means that insurers leave some room for how they want to define it and / or apply it to the facts of a policyholder
What it means to Being "under construction" can mean many different things to a reasonable policyholder. Some examples may be: The date given by the building contract when construction is to begin; the date on which the permit for construction work becomes active, or the date on which the first construction or restoration worker arrives at the property.
Couch on Insurance the main dissertation on everything insurance, says the following regarding the language "the course of the building":
A "builder's risk" policy that insures during the "construction process", regardless of date, enters into force when construction begins. When the clause also specifies coverage for materials used in the "construction" of a building or a ship, the coverage has been kept to begin when materials for the construction are brought to the construction site with the intention of incorporating them in due course 2
Commercial policyholders have access to Couch on Insurance (or other resources that have a catalog of applicable case law) to discern what it means to be considered "under construction."
The above examples of what a policyholder might think are considered "under construction" are all reasonable. Without the policy defining such a broad phrase, these commercial policyholders will be left to their own interpretations of their Builder & # 39 ;s Risk policy.
And if it is established that there is in fact more than a reasonable interpretation of what it means to be considered "Under construction" for an insured premises, there is an ambiguity, and it should be interpreted against the establishment of the insurance. 3
The fact is that without the policy anywhere defining the term under construction policyholders will probably have different interpretations of when their insurance cover can be triggered under this type of insurance, if a question arises. . If you are a policyholder who is unsure whether your claim under such a policy is incorrectly denied, contact an attorney at Merlin Law Group to take a look.
1 https: // www. thehartford.com/resources/construction/builders-risk-insurance
2  §102: 31. Builder's risk, in general; buildings, 7 Couch on Ins. § 102: 31 .
3 Pacific Employers Ins. Co. v. Wausau Buss. Ins. Co. 2007 WL 2900452, at * 4 (M.D. Fla. 2 October 2007).